Eni appears to have misled shareholders over Nigeria corruption scandal at 2014 AGM

The
most senior managers at oil giant Eni appear to have misled shareholders over
the company’s actions in a corrupt oil deal at its 2014 AGM. This is
very important – as they gather for the 2015 meeting, shareholders in Italy’s biggest company should expect straight answers over
a deal which poses real risks to their investments. The corruption at the heart
of the deal deprived the Nigerian state of over U.S. $1.1 billion, has
triggered investigations by authorities in three countries, and could
ultimately lead to the Eni and its partner Shell losing access to the oil
block.

The
back story goes like this: in 2011 Eni and Shell paid $1.1bn for oil block OPL
245, one of the biggest off the coast of Nigeria. The money should have ended
up in Nigerian state coffers, where it is badly needed - $1.1bn is equivalent to two-thirds of the 2014 Nigerian healthcare
budget. Instead
the payment was made to the government, who then passed on to Malabu, a front
company owned by the former Nigerian oil minister, Dan Etete Etete had awarded
his own company the block whilst in office under the former dictator Sani
Abacha, and was now, together with others was cashing in on his corrupt
acquisition.

Eni’s
senior leadership claimed it didn’t know that Etete was behind Malabu at its 2014 AGM. But due diligence reports
commissioned by Eni seen by Global Witness show that that Eni was told
“Whatever the formal ownership structure of Malabu, all of the sources to whom
we have spoken are united in the opinion that Dan Etete is the owner of the
company”. The company did later adjust its story saying that they never completed their full due diligence
process because they changed their mind about doing a deal directly with Malabu,
doing the deal via the Government instead, and that Etete’s involvement was a
‘red flag’ and an ‘element of concern. However, it is difficult to understand
how Eni’s staff could honestly conclude that its due diligence had not found
clear evidence for concluding that Etete was ultimately behind Malabu.

Global
Witness put these points to Eni in March 2015. Eni acknowledged the Italian
authorities investigation and stated it had reported to the US DOJ and SEC and
said they were fully cooperating. The company said that many of the statements
we put them were inaccurate but declined to comment on specific points.

So,
the situation is alarming. Italy’s biggest company knew it was dealing with a
suspect former public official in Nigeria, but
went ahead with a deal they knew was for the benefit of Malabu even
though it was passed through the Nigerian government anyway as court evidence
has shown. As authorities probed and
the net closed, it then appears to have misled its shareholders over what it
knew about Etete’s ownership of Malabu. So how can investors trust the people
managing their money, and what changes is the board going to make to win back
that trust?

The missing money also comes at a huge
cost for the people of Nigeria, as this infographic shows.

The case also highlights the need
for effective laws that bring such payments into the open, so that investors
and citizens know who is getting the money and what risks the deal might pose.
Yet a small number of oil companies including
Eni's partner Shell have been attempting to weaken the implementation of
such laws in the EU and US.

Secrecy over payments for deals
exposes investors to risks they do not know about, entrenches corruption and
robs people in countries like Nigeria of money they badly need for things like
schools and hospitals. Shareholders should be asking about this deal today
– and they should demand honest answers this time.